Report: Oil Shock Sends Freight Costs to COVID-Era Levels

Driven by the closure of the Strait of Hormuz, transportation prices and capacity are mirroring levels last seen during the COVID-era freight rate spike, according to a logistics report.

The March Logistics Manager’s Index hit 65.7, up 4.2 points from February’s 61.5, marking the fastest expansion since May 2022. Any score above 50 indicates the industry is expanding; a score below 50 suggests contraction.

Transportation prices rose 12.7 points to 89.4, the highest reading since March 2022, while transportation capacity contracted to 39.2, amid a global oil supply squeeze. The 50.2-point gap is the highest positive inversion since the height of the COVID-era freight boom in November 2021.

 Meanwhile, inventory levels sit at just 54.8, driven more by larger companies than smaller companies, who reported little to no movement, meaning companies can’t rely on stockpiles if demand shifts or supply chains seize up.

“The rebalancing that we saw after the holiday season is impacting stock levels across the entire supply chain,” said Steven Carnovale, Ph.D., associate professor of supply chain management. “This, coupled with the current conflict in Iran leads to further tightening. We saw a similar tightening of capacity and reduction in systemwide inventory when the war in Ukraine began.”

The LMI, a survey of director-level and above supply chain executives, measures the expansion or contraction of the logistics industry using eight unique components: inventory levels, inventory costs, warehousing capacity, warehousing utilization, warehousing prices, transportation capacity, transportation utilization, and transportation prices.

Researchers at Arizona State University, Colorado State University, Rutgers University, the University of Nevada, Reno, along with FAU, calculate the LMI using a diffusion index to offer a dynamic view of the U.S. supply chain, anticipating economic shifts and trends.

Inventory costs also rose 8.4 points to 75.2, the highest rate of growth since August 2025. Should costs continue to rise, the lean, high-turnover inventory strategy that many firms had been employing for the first few months of 2026 may be at risk.

“While it can certainly be expensive, inventory stockpiles are often one of the most effective tools to mitigate exogenous supply shocks,” Carnovale said. “The reversion toward lean necessarily reduces these inventory levels and as a result can lead to supply interruptions. The pendulum shift between ‘just-in-time’ and ‘just-in-case’ seems as fluid as ever.”

-FAU-